<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report
(Date of earliest event reported)
April 21, 1999
Choice Hotels International, Inc.
---------------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-1209792
-------- ----------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation)
10770 Columbia Pike, Silver Spring, Maryland 60563
- -------------------------------------------- -----
(Address of principal executive offices) (Zip code)
Registrant's telephone number,
including area code (301)592-5000
-------------
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Item 5.
- -------
The company announced in two press releases, attached as Exhibits 99.1 and
99.2, certain information concerning Choicebuys.com, its web-based hotel product
purchasing system. The discussion in the press releases contains forward looking
statements which represent management's current judgment. However, these
statements are subject to risks and uncertainties. The following factors, among
others, could cause actual results to differ materially:
(1) The company may not be able to generate significant franchisee
utilization of Choicebuys.com. Because the company receives a
percentage of revenues generated through the system, failure of
franchisees to use the system will decrease potential revenues to the
company.
(2) The company may not be able to sign up all of the vendors
necessary to service franchisees. The purpose of Choicebuys.com is to
offer franchisees an easy to use purchasing system for hotel supplies.
However, if a significant number of a franchisee's vendors are not on
the system, the franchisee will purchase those supplies outside of the
system and the company will be deprived of its potential revenues.
Also, lack of vendors may cause franchisees to become dissatisfied
with the system and not utilize it.
(3) The company's revenues from Choicebuys.com will be generated
through commissions from product sales. If the company is unable to
negotiate favorable commission rates from participating vendors,
potential revenues will be reduced.
(4) The company may not be able to negotiate competitive prices with
the vendors who participate in Choicebuys.com. This may cause
franchisees to purchase their supplies outside of the system and
thereby deprive the company of its potential revenues.
(5) The company may experience unforseen technological problems with
the Choicebuys.com system or the technology may become outdated or
incompatible with advances in web-based technology.
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Investors are urged to read the Company's other documents filed with the
Securities and Exchange Commission.
Item 7. Financial Statements and Exhibits
- - ------ ---------------------------------
(c) Exhibits
--------
99.1 Press Release, dated April 21, 1999 announcing Choicebuys.com, the
company's web-based ordering system.
99.2 Press Release, dated April 21, 1999 announcing the company's earnings
for the first quarter of 1999.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
CHOICE HOTELS INTERNATIONAL, INC.
(Registrant)
By: /s/ Joseph M. Squeri
------------------------
Name: Joseph M. Squeri
Title: Vice President, Treasuer
& Contoller
Date: April 21, 1999
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EXHIBIT 99.1
------------
FOR IMMEDIATE RELEASE
PRESS CONTACT: JOHN HAWKINS
VICE PRESIDENT
CORPORATE COMMUNICATIONS
ANNE CURTIS
DIRECTOR
CORPORATE COMMUNICATIONS
301-592-5032
ANALYST CONTACT: JOE SQUERI
301-592-5006
CHOICEBUYS.COM
CHOICE HOTELS' WEB-BASED ORDERING SYSTEM "LIGHT-YEARS"
AHEAD OF INDUSTRY
SILVER SPRING, MD. (APRIL 21, 1999) Choice Hotels International, Inc. (NYSE:
CHH) today announced the launch of CHOICEBUYS.COM, an innovative web-based
purchasing system and the company's initial foray into web-based technology as a
significant revenue generator.
The user-friendly Choicebuys.com, complete with detailed product descriptions,
photos and itemized pricing, revolutionizes the way the franchisee owners of
Comfort, Quality, Econo Lodge, Clarion, Sleep Inn, Rodeway Inn and MainStay
Suites brand hotels order supplies needed to run their businesses.
Franchisees may now place orders with endorsed vendors, pay for purchases
and track delivery via the Internet.
"Choicebuys.com is the first step for Choice in maximizing the value of the
Internet to our hotels and our guests," said Charles A. Ledsinger, Jr.,
president and chief executive officer. "Its launch puts us light-years ahead of
our competitors, and we are also exploring ways to bring technology to our
guests through in-room Internet service."
"Choicebuys.com has advanced hotel purchasing technology into the new
millennium," said Daniel Rothfeld, vice president of partner services. "With a
click of a mouse, franchisees can now stroll through a virtual shopping mall to
check specifications and compare prices for every conceivable product needed to
run a hotel."
According to Rothfeld, by virtue of its ease of usage and its preferred
pricing, the system may potentially drive annual expenditures of $1.5 billion in
goods and services by
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Choice franchisees. "Our objective in the development of Choicebuys.com was to
provide franchisees with a system that is both cost-effective and easy to use,"
Rothfeld said.
"Choicebuys.com is a prime example of our four-win philosophy at work,"
said Rothfeld. "By leveraging the size of the Choice system to craft
partnerships with quality vendors and service providers, we create a winning
environment that benefits the company, our preferred vendors, our franchisees
and their guests."
The company's analysis, based on research from its franchisees and from Smith
Travel Research, a leading research firm tracking the lodging industry,
estimates that more than $11 billion in goods and services are purchased
annually throughout the industry. "We've created a turnkey system that is
extremely attractive to other companies," Rothfeld said. "Choicebuys.com
becomes even more of a potential revenue generator for us as we consider ways to
make it available for license industry-wide."
Choice Hotels International franchises almost 5,000 hotels open and under
development in 36 countries marketed under the brand names Comfort, Quality,
Clarion, Sleep Inn, Econo Lodge, Rodeway Inn and MainStay Suites. For more
information, visit www.choicehotels.com.
###
Comfort, Quality, Clarion, Sleep Inn, Econo Lodge, Rodeway Inn and MainStay
Suites are registered trademarks and service marks of Choice Hotels
International, Inc. Choicebuys.com is a pending trademark of Choice Hotels
International.
Certain matters discussed in this press release may constitute forward-
looking statements within the meaning of federal securities laws. Such
statements are based on management's beliefs, assumptions and expectations,
which in turn are based on information currently available to management.
Actual performance and results could differ from those expressed in or
contemplated by the forward-looking statements due to a number of risks,
uncertainties and other factors, many of which are beyond Choice's ability to
predict or control. For further information on factors which could impact
Choice and the statements contained herein, we refer you to the filings made by
Choice with the Securities and Exchange Commission, including its registration
statement on form S-4 and report on form 8-K.
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EXHIBIT 99.2
------------
FOR IMMEDIATE RELEASE
CONTACT: JOHN HAWKINS
VICE PRESIDENT
CORPORATE COMMUNICATIONS
(301) 592-5075
[email protected]
JOE SQUERI
VICE PRESIDENT,
TREASURER, CONTROLLER
(301) 592-5006
CHOICE HOTELS REPORTS RECORD
FIRST QUARTER EARNINGS;
RECURRING NET INCOME UP 34%;
RECURRING DILUTED EPS INCREASES 42%
SILVER SPRING, MD. (APRIL 21, 1999) Choice Hotels International, Inc. (NYSE:
CHH) today reported first quarter 1999 net income of $10.3 million, or $0.18
diluted earnings per share (EPS), increases of 26% and 36% respectively, over
the $8.1 million in net income and $0.13 diluted EPS reported for first quarter
1998.
Recurring net income for the first quarter of this year was $9.5 million,
or $0.17 diluted EPS, representing a 34% increase in net income and a 42%
increase in diluted EPS compared to recurring net income of $7.1 million, or
$0.12 diluted EPS for the same period a year ago.
"Choice Hotels continues to register very strong earnings because of solid
unit growth and hotel performance," said Charles A. Ledsinger, Jr., president
and chief executive officer. He continued, "We are very pleased that the
fundamentals of the business continue to be strong, as we achieve a higher
effective royalty rate through a shift in product mix that matches our overall
brand strategy."
The company reported franchise-related revenues of $28.8 million for first
quarter 1999, compared to $26.7 million for first quarter 1998.
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Franchise-related revenues exclude product sales and European hotel
operations revenue, both of which are classified as non-strategic operations.
The company sold its European hotel operations to Friendly Hotels PLC in January
1998. In the fourth quarter of 1998, the company discontinued the group
purchasing program as previously operated.
Royalty revenues for first quarter 1999 increased 15% to $23.8 million from
$20.6 million for the same period a year ago, with the system-wide domestic
effective royalty rate also increasing from 3.46% in first quarter 1998 to 3.61%
for the first quarter of 1999. Domestic revenue per available room (RevPAR)
increased 2.0% from $26.34 in first quarter 1998 to $26.87 in the quarter just
ended.
As of March 31, 1999, the total number of Choice hotels on-line
worldwide grew 15% to 4,056 from 3,522 as of the same date a year ago. As of
March 31, 1999, the total number of rooms worldwide increased 10% to 325,326
from 294,937 as of the same date a year ago.
As of March 31, 1999, the company had 778 franchised hotels with
63,427 rooms either in design or under construction in its worldwide hotel
system.
During the first quarter of 1999, the company introduced its
revolutionary Internet purchasing system Choicebuys.com. Choicebuys.com allows
hotel owners to purchase goods and services for their hotels at discounted
prices.
By virtue of its ease of usage and its preferred pricing, the system
may potentially drive annual expenditures of $1.5 billion in goods and services
by Choice franchisees.
"Choicebuys.com is just the first step for Choice in maximizing the
value of the Internet to our hotels and our guests," said Ledsinger. "Choice is
aggressively exploring ways to bring technology to our guests through in-room
Internet service, a strategy that will bring significant value to our
franchisees, guests and shareholders."
Notable Events
- --------------
Among the notable company events occurring since the first of the year:
* Continuation of the stock repurchase program announced June 25, 1998. The
company has purchased 5.9 million shares of common stock at a total cost
of $80.6 million as of April 21, 1999, and has remaining authority to
acquire up to 2.8 million additional shares. As of April 21, 1999, 54.9
million shares are outstanding.
* Opening of the 200th Sleep Inn hotel in the Buckhead section of Atlanta
by Summit Management Corporation.
* Creation of new development incentives for: the MainStay Suites hotel
brand to spur growth of the extended-stay brand in target markets; the
Clarion brand to gain distribution in key gateway markets; and the Sleep
Inn brand to assist franchisees with new hotel marketing.
* Announcement of a new development plan for the Caribbean, with the goal
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of adding 25 new hotels in the Comfort, Quality, Clarion and Sleep Inn
brands within the next four years.
* Signing of a development agreement for the Middle East and Africa with
Windsor Hotels of Cairo, Egypt, that will add 17 properties in the
Clarion and Quality brands within three years.
* Revision of the basic franchise agreement to reflect a reduction in the
cap on liquidated damages from 60 to 36 months for franchisees leaving
the system.
Choice Hotels International is the second-largest hotel franchisor in the
world with 4,056 hotels open, representing 325,326 rooms, and another 778 hotels
under development, representing 63,427 rooms, in 36 countries, as of March 31,
1999. Its Comfort, Quality, Clarion, Sleep Inn, Econo Lodge, Rodeway Inn and
MainStay Suites brands serve guests worldwide.
# # #
Certain matters discussed in this press release may constitute forward-
looking statements within the meaning of the federal securities law. Such
statements are based on management's beliefs, assumptions and expectations,
which in turn are based on information currently available to management.
Actual performance and results could differ from those expressed in or
contemplated by the forward-looking statements due to a number of risks,
uncertainties and other factors, many of which are beyond Choice's ability to
predict or control. For further information on factors that could impact Choice
and the statements contained therein, we refer you to the filings made by Choice
with the Securities and Exchange Commission, including its registration
statement on Form S-4 and report on Form 8-K.
Additional corporate information may be found on the Choice Hotels'
Internet site, which may be accessed at www.choicehotels.com
Comfort, Quality, Clarion, Sleep Inn, Econo Lodge, Roadway Inn and MainStay
Suites are registered trademarks and service marks of Choice Hotels
international Inc. Choicebuys.com is a pending trademark of Choice Hotels
International.
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Choice Hotels International, Inc.
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
(In thousands, except per share amounts) Three Months Ended
March 31, March 31,
Revenues 1999 1998
------------ -----------
<S> <C> <C>
Royalty fees $23,798 $20,646
Initial franchise fees and relicensing fees 2,849 3,414
Partner service revenue 1,716 1,618
Other 410 1,040
------------ -----------
Total revenues 28,773 26,718
Operating expenses
Selling, general and administrative 10,979 11,216
Depreciation and amortization 1,762 1,824
------------ -----------
Total operating expenses 12,741 13,040
Operating income 16,032 13,678
Non-strategic operations (a)
Product sales 134 426
European operations - (48)
------------ -----------
Total non-strategic operating income 134 378
Other
Gain on sale of stock (1,260) (1,766)
Interest and dividend income (4,608) (2,720)
Interest expense 4,762 4,581
------------ -----------
Total other (1,106) 95
------------ -----------
Income before income taxes 17,272 13,961
Income taxes 6,995 5,815
------------ -----------
Net income $10,277 $ 8,146
============ ===========
Weighted average shares outstanding 55,886 59,742
============ ===========
Diluted shares outstanding 56,508 60,970
============ ===========
Diluted earnings per share $0.18 $0.13
============ ===========
</TABLE>
(a) The company sold its European hotel operations to Friendly Hotel PLC in
January 1998. In the fourth quarter of 1998, the company discontinued the
group purchasing program as previously operated.
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<TABLE>
<CAPTION>
Choice Hotels International, Inc.
Consolidated Balance Sheets
(In thousands)
March 31, March 31,
1999 1998
------------ -----------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 4,536 $ 1,692
Other current assets 27,729 33,969
------------ -----------
Total current assets 32,265 35,661
Fixed assets and intangibles, net 147,955 144,575
Note receivable from Sunburst Hospitality 131,259 127,849
Investments and other 96,202 90,140
------------ -----------
Total assets 407,681 398,225
------------ -----------
LIABILITIES
Current portion of long-term debt 17,646 22,646
Other current liabilities 29,514 35,822
------------ -----------
Total current liabilities 47,160 58,468
Long-term debt 284,327 256,564
Deferred income taxes and other 30,885 26,683
------------ -----------
Total liabilities 362,372 341,715
------------ -----------
Total shareholders' equity 45,309 56,510
------------ -----------
Total liabilities and shareholders' equity $407,681 $398,225
============ ===========
</TABLE>
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<TABLE>
<CAPTION>
CHOICE HOTELS INTERNATIONAL
SUPPLEMENTAL OPERATING INFORMATION BY BRAND
Domestic Hotel System
Three Months Ended
March 31, March 31,
1999 1998
------------ -----------
<S> <C> <C>
COMFORT INN
Hotels 1,214 1,167
Rooms 95,397 94,005
Avg. Daily Rate $54.44 $52.59
(ADR)
Occupancy % 52.3% 53.2%
RevPAR $28.46 $27.96
Effective Royalty 4.10% 3.93%
Rate
COMFORT SUITES
Hotels 192 157
Rooms 15,768 12,670
Avg. Daily Rate $67.24 $65.11
(ADR)
Occupancy % 58.3% 59.1%
RevPAR $39.18 $38.47
Effective Royalty 4.40% 4.24%
Rate
QUALITY
Hotels 425 425
Rooms 49,312 50,584
Avg. Daily Rate $57.64 $54.80
(ADR)
Occupancy % 47.3% 49.2%
RevPAR $27.26 $26.95
Effective Royalty 3.23% 2.98%
Rate
CLARION
Hotels 109 93
Rooms 18,784 15,689
Avg. Daily Rate $70.49 $71.16
(ADR)
Occupancy % 51.0% 51.6%
RevPAR $35.97 $36.73
Effective Royalty 2.03% 2.12%
Rate
SLEEP
Hotels 205 164
Rooms 15,641 12,198
Avg. Daily Rate $50.47 $48.14
(ADR)
Occupancy % 49.2% 50.6%
RevPAR $24.83 $24.35
Effective Royalty 3.70% 3.38%
Rate
</TABLE>
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CHOICE HOTELS INTERNATIONAL
SUPPLEMENTAL OPERATING INFORMATION BY BRAND
Domestic Hotel System
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
1999 1998
------------ -----------
<S> <C> <C>
MAINSTAY
Hotels 23 11
Rooms 2,142 1,018
Avg. Daily Rate $55.12 $56.91
(ADR)
Occupancy % 52.0% 30.4%
RevPAR $28.64 $17.30
Effective Royalty 2.96% 2.57%
Rate
ECONO LODGE
Hotels 695 695
Rooms 44,266 45,123
Avg. Daily Rate $40.90 $39.35
(ADR)
Occupancy % 43.0% 44.1%
RevPAR $17.61 $17.34
Effective Royalty 3.59% 3.50%
Rate
RODEWAY
Hotels 190 202
Rooms 11,796 12,621
Avg. Daily Rate $40.92 $39.64
(ADR)
Occupancy % 42.4% 42.1%
RevPAR $17.36 $16.69
Effective Royalty 2.37% 2.49%
Rate
TOTAL CHOICE - DOMESTIC
Hotels 3,053 2,914
Rooms 253,106 243,908
Avg. Daily Rate $54.35 $52.35
(ADR)
Occupancy % 49.4% 50.3%
RevPAR $26.87 $26.34
Effective Royalty 3.61% 3.46%
Rate
================================================================================
</TABLE>
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